National Budget

What do you think of the statement 'There is only so much money to go around'? Currently, the public wants better health care, better highways, better schools, and stronger national defense as it feels that it pays enough taxes to receive all these services. Each year, our political leaders at the local, state, and national levels struggle with decisions on how to spend the revenues from taxes. How does the budget process for the government resembles a production possibility curve and trade-offs? Specifically, consider the trade-off between spending on health care programs versus spending on the military. Are there increasing opportunity costs of spending more on health care than on the military? If so, what are some of the opportunity costs in both short run and long run? If health care services are entirely provided by the government, are the property rights of any group violated or harmed?

Solution Preview

This is a fairly complex question. Remember, though I'm sure you know, that I cannot write the paper for you. I can only give you some concepts, and you take them and make sense out of them in this paper.

This is a nice intro: http://krypton.mnsu.edu/~renner/ppc.htm and here: http://www.basiceconomics.info/production-possibilities-frontier.php

As you probably know, the production possibility curve/frontier, opportunity costs, and diminishing returns are all tightly connected.

1. The issue of budgetary debates as a manifestation of the production curve is a little odd, because these are not market relationships. These are political ones. Yet, there are some similarities.
2. The concept of there "being only so much money to go around" is a truism - the idea is scarce resources. The first issue you need to grasp is the immense increases in production over the last 200 years. Are resources really scarce any more? If the full productive capacity of the US were utilized, would it be impossible to fund both a fully stocked military and a fully stocked health program?
3. Both military spending and health care spending are basically privatized in that military production and health care are currently in private hands. In both cases, the government contracts out to them. The line between state and private expenditures is very blurred these days.
4. Let's assume that the "scarce resources" idea is real and inevitable. The point of the budget battles is to come to some kind of consensus on a balance between health and defense. The ideas would look like this:

Solution Summary

The solution provides assistance, information and advice in tackling the problem (see above) on the topic of public policy and the nation's budget. Resources are listed. A word version of the solution is attached.